Japan Steel Sues Toyota for the Industrial Espionage Incident

Nippon Steel Corporation sued Toyota and the Chinese steel company Baoshan Iron & Steel in the Tokyo District Court on October 14 for infringing on the relevant patent rights of electromagnetic steel sheets used in electric vehicle motors. Patent lawsuits filed by large Japanese companies, especially raw material manufacturers, are extremely rare. What factors have driven the actions of Japan Steel Corporation? In the fierce confrontation of the anticipated decarbonization technology “electromagnetic steel version”, the past history of secret activities of China and South Korea’s industrial spies has surfaced.

In the afternoon of the same day, after news broke that Nippon Steel sue Toyota for patent infringement, the voice of surprise expanded in the industry. In the world of intellectual property rights, such as the continuous world-scale patent litigation by Apple of the United States and Samsung Electronics of South Korea surrounding smartphones from 2011 to 2018, leading European and American companies beat Asian companies including Japan, or between European and American companies. There are many situations of struggle.

Patent litigation between Japanese companies involves economic security

It is extremely rare that Japanese companies, especially large-scale companies that are representative in the industry, have filed lawsuits for patent infringement. Originally, Japan was the world’s largest patent application country from the 1970s to the mid-2000s. The number of patent applications in Japan in 2020 is close to 300,000, second only to about 1.4 million in China and about 650,000 in the United States, ranking third in the world.

If the counterparty is a client company, maintaining the transaction while avoiding disputes is a priority, and there is also a “cross-licensing agreement” with competing companies that mutually allows the use of intellectual property rights. If it develops into a dispute, there is a risk that neither of them can make products.

This time, Nippon Steel broke this “common sense” and filed a lawsuit with rival Baoshan Iron and Steel and even Toyota, one of its largest customers. One of the reasons is that electromagnetic steel sheets are one of the key technologies used in the era of decarbonization of electric vehicle motors. In the future, there will be huge demand around the world, and it is also regarded as an economic security technology that goes hand in hand with semiconductors. Electromagnetic steel sheets need to go through a special manufacturing process, which is difficult to manufacture. To maintain the stability of quality, independent technology and experience are required. From the point of view of Nippon Steel, it is impossible to manufacture easily.

For Nippon Steel, which faces cost competition from steel companies in South Korea and China, electromagnetic steel plates are one of the high value-added products. Baosteel’s continued manufacture of products suspected of patent infringement and supply to Toyota cannot be ignored. Not only is Baosteel as a manufacturer, it also sued Toyota as a customer, or intended to contain other automakers.

The secret war between Japan, China and South Korea over electromagnetic steel plate technology

Behind the rare decision of Nippon Steel, the painful memory of the past technology outflow surrounding the electromagnetic steel plate also flickered. This is an incident in which Japan Steel’s electromagnetic steel plate technology was illegally stolen by Korean and Chinese industrial spies after the 1980s.

In April 2012, Nippon Steel & Sumitomo Metal (now Nippon Steel) stated that “the company’s trade secret information about electromagnetic steel sheets was stolen” and sued the Tokyo District Court for violating the “Unfair Competition Prevention Act”. The company’s former technicians and POSCO, a large Korean steel company.

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